96-525

 No. 96-525

 IN THE SUPREME COURT OF THE STATE OF MONTANA

 

1997

WASTE MANAGEMENT PARTNERS OF 

BOZEMAN, LTD., d/b/a THREE RIVERS

DISPOSAL COMPANY,

 

 Appellant, 

 v.

 

MONTANA DEPARTMENT OF PUBLIC 

SERVICE REGULATION, MONTANA 

PUBLIC SERVICE COMMISSION, and 

HARRY ELLIS, d/b/a/ CUSTOMIZED SERVICES, 

 Respondents.

APPEAL FROM: District Court of the First Judicial District,

 In and for the County of Lewis and Clark,

 The Honorable Thomas Honzel, Judge presiding.

COUNSEL OF RECORD:

 For Appellant:

 William Andrew Wilson, Denver, Colorado; John Alke, Hughes, Kellner,

 Sullivan & Alke, Helena, Montana

 For Respondent:

 Denise Peterson, Montana Public Service Commission, Helena, Montana;

 Jerome Anderson, Helena, Montana

 Submitted on Briefs: May 15, 1997

 Decided: August 26, 1997

Filed:

 __________________________________________

 Clerk

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Justice William E. Hunt, Sr., delivered the Opinion of the Court.

 Appellant Three Rivers Disposal Company (Three Rivers), formerly Waste

Management Partners of Bozeman, Ltd., appeals from the decision issued by the First

Judicial District Court, Lewis and Clark County, affirming upon judicial review the 

order

of the Montana Public Service Commission (PSC) granting Harry Ellis d/b/a Customized

Services (Ellis) a Class D certificate to transport garbage in Madison and Gallatin

Counties. We affirm the District Court.

 The following issues are presented on appeal:

 1. Did the PSC apply the correct standard for granting Class D certification? 

 2 Did the District Court err when it affirmed the PSCþs finding that Ellis 

was

a fit applicant?

 3. Did the District Court err when it affirmed the PSCþs finding that the 

public

convenience and necessity required that it authorize Ellisþ service?

 4. Did the District Court err when it affirmed the PSCþs finding that Three

Rivers would not be impaired by granting Ellisþ application?

 5. Did the PSC err by failing to follow its own precedent, and if so, did it 

err

by failing to provide a reasoned explanation for its departure from that precedent?

 FACTUAL BACKGROUND 

 Three Rivers has hauled the majority of garbage in Gallatin and Madison 

Counties 

 since 1983. On three occasions, Ellis has filed an application with the PSC for a 

Class

D certificate to transport waste products on routes within those same counties and 

thereby

directly compete with Three Rivers. Each time, Three Rivers has protested Ellisþ

application on the grounds that granting the certificate would infringe upon its 

area of

operations and harm both it and its customers. 

 Ellis d/b/a Rozel Corp. filed his first application in 1984. The PSC denied 

that

application, finding that the grant of authority would have a negative impact upon 

Three

Rivers and the public. (Ellis I) It found that the þpublic convenience and 

necessityþ for

an additional garbage service had not been established, because there was no 

evidence of

unmet demand and few concerns regarding the adequacy of Three Riversþ service or its

rates. Additionally, the recent history of the area demonstrated that competition 

would

adversely impact Three Rivers and the consumer. The publicþs need for stability at 

that

time outweighed any advantages brought by competition. The Montana Supreme Court

upheld the PSCþs decision in Rozel Corp. v. Dept. of Pub. Serv. Regulation (1987), 

226

Mont. 237, 735 P.2d 282. 

 Ellis filed a second application in 1987. (Ellis II) The PSC rejected his

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application without a hearing.

 The third application, which is the subject of this appeal, was filed on 

January 20,

1994. After conducting hearings in Bozeman, Montana, on April 13 and 14, 1994, and

in Ennis, Montana, on May 11, 1994, the PSC granted Ellisþ application on December

9, 1994. The PSC found that Ellis was fit to provide service; that there was 

substantial

unmet consumer need for additional service; that Three Rivers would not be harmed by

the grant of the application; and that competition would promote the public interest 

with

improved service. Three Rivers moved the PSC to reconsider its order, which the PSC

denied on April 24, 1995.

 Three Rivers petitioned for judicial review of the PSCþs decision to the First

Judicial District Court, Lewis and Clark County. The District Court affirmed the 

PSC,

holding that the PSC properly considered Ellisþ application and that the facts 

presented

in 1994 were vastly different from those in 1984 when the PSC denied Ellisþ 

application. 

It further held that substantial credible evidence supported the PSCþs 

determinations. 

Three Rivers appeals from the District Courtþs decision.

 STANDARD OF REVIEW 

 Section 2-4-704, MCA, sets forth the standards for judicial review of an

administrative agencyþs decision. Under those statutory standards, conclusions of 

law

will be reversed if they are incorrect. Steer, Inc. v. Department of Revenue 

(1990), 245

Mont. 470, 474-75, 803 P.2d 601, 603. The Court defers to an agencyþs interpretation

of a statute that it administers. Norfolk Holdings v. Dept. of Revenue (1991), 249 

Mont.

40, 44, 813 P.2d 460, 462. 

 An agencyþs findings of fact will be reversed only if they are clearly 

erroneous. 

Steer, Inc., 803 P.2d at 603. In Interstate Production Credit v. DeSaye (1991), 250

Mont. 320, 820 P.2d 1285, the Court adopted a three-part test to determine if a 

finding

is clearly erroneous. First, the Court will review the record to see if the 

findings are

supported by substantial evidence. If they are, the Court will next determine 

whether the

finder of fact has misapprehended the effect of the evidence. Third, the Court will

review the record to determine whether it is left with the þdefinite and firm 

conviction

that a mistake has been committed.þ DeSaye, 820 P.2d at 1287 (citing U.S. v. U.S.

Gypsum Co. (1948), 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746).

 ISSUE ONE

 Did the PSC apply the correct standard for granting Class D certification?

 As stated earlier, the Court reviews an agencyþs conclusions of law to determine

whether its interpretation of the law is correct. Steer, Inc., 803 P.2d at 603. 

 Section 69-12-323, MCA, sets forth the factors the PSC must consider when 

rendering a decision on an application for a Class D motor carrier certificate to 

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transport

waste materials:

 (2)(a) If after hearing upon application for a certificate, the

 commission finds from the evidence that public convenience and necessity

 require the authorization of the service proposed or any part thereof, as the

 commission shall determine, a certificate therefor shall be issued. In

 determining whether a certificate should be issued, the commission shall

 give reasonable consideration to the transportation service being furnished

 or that will be furnished by any railroad or other existing transportation

 agency and shall give due consideration to the likelihood of the proposed

 service being permanent and continuous throughout 12 months of the year

 and the effect which the proposed transportation service may have upon

 other forms of transportation service which are essential and indispensable

 to the communities to be affected by such proposed transportation service

 or that might be affected thereby.

 (b) For purposes of Class D certificates, a determination of public

 convenience and necessity may include a consideration of competition.

The PSC interpreted 69-12-323, MCA, as requiring it to address five factors when

considering Ellisþ application. Those factors are:

 1. Is the applicant fit and able to perform the proposed service?

 2. Does the public convenience and necessity require the authorization

 of the proposed service?

 3. Can and will existing carriers meet the public need for the proposed

 service?

 4. Would the proposed service have an adverse impact on existing

 transportation services?

 5. (discretionary for Class D applications, only) If there is a public

 need for the service and applicant is fit to provide the service (even

 if existing carriers could meet the need or might be harmed by

 granting the application), would competition with the existing

 carriers promote the public interest? (Emphasis added.)

In summarizing these factors, the PSC concluded that an applicant þmust show that the

public convenience and necessity require the proposed service,þ and that the PSC þmay

consider competition as a factor in determining public convenience and necessity.þ

 Three Rivers argues that the PSCþs interpretation of the factors it must 

consider

is incorrect, and the District Court erred when it implicitly embraced them. 

Specifically,

it takes issue with the emphasized portion of the fifth factor outlined above 

wherein the

PSC stated it had discretionary authority to evaluate whether competition provided 

by a

fit applicant would promote the public interest, even if existing carriers could 

meet the

need or might be harmed. It argues that the PSC can consider the benefits of 

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competition

to the public interest only after first finding that the existing services are 

inadequate, that

there will be no economic impairment to the existing services, and that the 

applicant is

fit. 

 We first note that Three Riversþ concerns are hypothetical only, because in 

fact,

the PSC did find that Three Riversþ service was inadequate; it did find that Three 

Rivers

would not suffer economic impairment by the grant of the additional authority; and 

it did

find that Ellis was a fit applicant. Moreover, before conducting any evaluation of

competition, the PSC made the threshold determination that the applicant was fit. 

Thus,

even were this Court to accept Three Riversþ analysis of the PSCþs decision and to 

adopt

Three Riversþ arguments, Three Rivers would not prevail.

 In any event, we hold that PSC employed the correct standard. The heart of

Three Riversþ contentions actually appears to center on the interplay between the

consideration of competition as a factor in granting authority and how that 

consideration

affects Three Rivers economically. As Three Rivers itself correctly stated in Rozel

Corp., the legislature has chosen to partially regulate the garbage industry in 

Montana. 

Rozel Corp., 735 P.2d at 285. By enacting Section 69-12-323(2)(b), MCA, it has given

the PSC the discretion to consider competition in order to handle potential harmful

monopoly situations. Rozel Corp., 735 P.2d at 285. Consideration of competition may

be beneficial in some cases, although certainly not in all cases. 

 Inherent in the concept of competition is the notion that the new applicant 

may

take away some business of the existing transport service. This alone will not 

mandate

that the PSC deny the application. Rather, the issue is whether under the particular

factual circumstance of the case, competition would impose undue hardship and impair

the existing transportþs ability to provide service to an extent contrary to public 

interest. 

This can only be decided on a case-by-case basis in conjunction with a consideration 

of

the other elements the PSC outlined above.

 When determining whether the public convenience and necessity requires the PSC

to authorize an additional authority, the legislature placed no limits on the order 

in which

the PSC must evaluate competition as Three Rivers suggests. The PSC can properly

consider competition as one additional factor in assessing the public convenience and

necessity. 

 In this case, after considering the threshold issue of whether Ellis was a fit

applicant, and after finding that there was an unmet public need, the PSC then 

properly

weighed the particular factual circumstances to determine whether competition would 

be

beneficial to the public convenience and necessity. It did not view competition as 

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a standalone controlling element, but rather as only one factor in the context of the 

principles

of motor carrier regulation. We hold that the PSC used the proper legal standards. .

 ISSUE TWO

 Did the District Court err when it affirmed the PSCþs finding that Ellis was a 

fit

applicant?

 When evaluating whether an applicant is fit, willing and able to provide 

service,

the PSC considered the following factors:

 1. The financial condition of applicant;

 2. The intention of the applicant to perform the service sought;

 3. The adequacy of the equipment the applicant has to perform the

 service;

 4. The experience of the applicant in conducting the service sought; and

 5. The nature of the previous operations, if there are allegations of

 illegal operations.

 Three Rivers asserts that Ellis was not a fit applicant, because (1) he owns 

only

two older garbage trucks--a 1975 Del Rio and a 1983 Ford; (2) he does not employ a

full-time mechanic; and (3) his net worth is only $293,000. However, the PSC found 

no

evidence that Ellisþ equipment was in disrepair, required a full-time mechanic, or 

would

otherwise fail to meet the garbage rounds. Additionally, the performance of the job

duties does not require garbage haulers to own the newest or most technologically

advanced equipment. Although his equipment may be older, Ellisþ financial records

indicated that he had the capability to operate and maintain his present equipment 

and to

acquire new equipment as needed. Additionally, with regard to the other criteria

considered by the PSC, Ellis intends to perform garbage-hauling services yearround. 

He also had many years of prior experience hauling garbage in Texas and even in

Montana on a contract basis. 

 Three Rivers next claims that Ellis is unfit because Ellis has allegedly 

operated

illegally in the past. Three Rivers first refers to an incident wherein Ellis 

allegedly

hauled garbage without proper authority. However, the PSC found that although Ellis

had received a citation for hauling without authority, some of that hauling was 

actually

exempt demolition work. Ellisþ citation was thus reduced upon his appearance in 

court. 

The record supports the PSCþs findings. Indeed, according to testimony, the court 

had

dismissed his fine and only ordered Ellis to pay $25.00 in court costs. 

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 Three Rivers also claims that a complaint was issued against Ellis on one other

occasion for allegedly violating the Montana Motor Carrier Act. But that evidence 

was

not made a part of the record at the hearings before the PSC, and this Court will not

consider it now.

 Third, Three Rivers refers to an incident wherein Ellis had allegedly not paid

certain workersþ compensation insurance coverage for an employee over a three-month

period in 1993. It argues that the PSC abused its discretion in refusing to 

consider that

incident and find Ellis unfit. On appeal, the PSC argues that workersþ compensation

issues are not within the PSCþs jurisdiction. The evidence below regarding this 

allegation

is minimal. The record does not reveal whether a claim was even filed against 

Ellis. 

 Evidence of illegal activity, even if willful, does not automatically 

disqualify an

applicant. Rather, the PSC has routinely considered bad faith operations as only one

element in assessing fitness. See, e.g., Application of Schlegel & Sons 

Contractors, Inc.

(December 23, 1993), Docket No. T-93.41.PCN, Order No. 6247a. The PSCþs position

is consistent with that taken by the ICC. See Armored Carrier Corporation v. United

States (1966), 260 F.Supp. 612, 615 (E.D.N.Y), affþd., 386 U.S. 778, 87 S.Ct. 1476,

18 L.Ed.2d 524 (1967). In this case, the PSC found that allegations of illegal 

activity

were scant and did not rise to the level of persistent illegal activity sufficient 

to require

the PSC to engage in analysis as to whether they impinged on Ellisþ fitness. 

Substantial

evidence supports the PSCþs decision. Assessing allegations concerning violations 

of the

Motor Carrier Act is peculiarly within the expertise of the PSC. We hold that the 

PSC

did not err in failing to find that either alleged violations of that Act or alleged 

violations

of the Workersþ Compensation Act rose to the level to require the PSC to conduct a

detailed analysis of the violations. Moreover, we hold that the PSC was not clearly

erroneous in failing to find that they rendered Ellis unfit. The District Court did 

not err

in affirming the PSC. 

 ISSUE THREE

 Did the District Court err when it affirmed the PSCþs finding that the public

convenience and necessity required that it authorize Ellisþ service?

 When determining public convenience and necessity, the PSC uses the analysis set

forth by the Interstate Commerce Commission in Pan-American Bus Lines Operation

(1936), 1 M.C.C. 190:

 The question . . . is whether the new operation or service will serve a

 useful public purpose, responsive to a public demand or need; whether this

 purpose can and will be served as well by existing lines or carriers; and

 whether it can be served by the applicant with a new operation or service

 proposed without endangering or impairing the operations of existing

 carriers contrary to the public interest.

The PSC may additionally consider competition. Section 69-12-323(2)(b), MCA. 

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 Three Rivers argues that the PSCþs decision finding that there was a need for 

Ellisþ

service was clearly erroneous. It asserts that it was only natural that some of its

customers were dissatisfied, but that there was insufficient evidence that its 

service was

inadequate. 

 To the contrary, however, evidence of Three Riversþ inadequate service and the

public need for another garbage hauler was overwhelming. The PSC exhaustively 

detailed

the testimony of approximately 40 witnesses who testified about their 

dissatisfaction with

Three Rivers. In short, Three Riversþ service was spotty and unreliable. It 

frequently

failed to haul away customersþ garbage, and when it did, it often left the dumpsters

overturned with garbage strewn on the ground. Some customers had to routinely 

monitor

Three Rivers to ensure that the garbage would actually be hauled away on the date and

time it was scheduled for pickup. Even though customers complained, Three Rivers

frequently charged them for services that were not rendered. Moreover, Three Riversþ

staff treated the public with disdain. Many customers testified that when they 

telephoned

Three Rivers to complain, they were treated rudely and with a take-it-or-leave-it 

attitude. 

At least one customer testified he was called a liar when he complained that the 

garbage

was not hauled away. Three Rivers discontinued service to some of the customers who

complained. The PSC found that Three Riversþ own witnesses corroborated the public

testimony. Specifically, it found that Three Rivers keeps lists of "chronics," tells

customers they are wrong, and informs customers who complain that if they do not like

it, they can haul the garbage themselves. It allows its staff to persist in treating

customers in a derogatory manner. 

 In spite of the poor service, Three Rivers charged customers dramatic rate

increases. For example, the superintendent of one school district testified that 

rates for

the district increased from $216.00 to $459.89 per month without any notice. The 

mayor

of another city testified that Three Rivers approached the city council and proposed 

a

400% rate increase. In 1993 when negotiations between Three Rivers and the city 

broke

down, the city disassociated itself from Three Rivers. In fact, many of Three 

Riversþ

former residential and commercial customers have been forced to haul their own 

garbage

due to Three Riversþ inconsiderate treatment, unreliable service, and large rate 

increases. 

Based upon this overwhelming evidence, we hold that the PSCþs finding that there was

substantial unmet shipper need was not clearly erroneous. 

 Three Rivers points to the PSCþs finding that Three Rivers "has the authority,

facilities, equipment and financial wherewithal" to provide service to the Gallatin 

and

Madison County customers, and argues that notwithstanding customer complaints Ellisþ

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application should therefore be denied. But whether the existing service is 

capable of

providing adequate service means nothing if it is unwilling to provide adequate 

service. 

The PSC therefore properly exercised its discretion and considered the element of

competition when assessing public need and convenience. It found that Three Rivers 

had

created a niche for competition which Ellis could fill by providing alternative 

service. 

The PSC found, and we agree, that competition in this case will promote the public

interest in improving services and perhaps rates, and filling consumer needs that 

Three

Rivers has failed to meet. We hold that the PSCþs findings were not clearly 

erroneous,

and the District Court correctly affirmed its decision. 

 ISSUE FOUR

 Did the District Court err when it affirmed the PSCþs finding that Three Rivers

would not be impaired by granting Ellisþ application?

 Three Rivers disputes the PSCþs finding that Three Rivers would not be harmed

by granting Ellisþ application. It points to the testimony of its executive officer 

and its

principal partner. The executive officer testified that Three Rivers upgraded its 

services

with a variety of modern equipment and a maintenance shop and that lost revenue will

hurt its ability to pay for equipment costs. Its principal partner feared that some 

of its

prime customers would utilize Ellisþ services, resulting in a significant financial 

loss to

Three Rivers. 

 But the PSC found that Three Riversþ operating statement and financial reports

indicated that it was þflush with equipment, facilities, [and] staffþ as well as 

expensive

computer equipment with þunnecessary bells and whistles.þ Moreover, Three Rivers has

extensive resources. Its gross revenues had increased from $1,200,000 in 1986 to

$2,368,000 in 1992. Other parts of Three Riversþ financial reports included costs 

such

as embezzling costs and landfill development costs, which the PSC stated were not the

responsibility of the public. Based upon these findings, the PSC concluded that 

with all

its resources, Three Rivers would not be harmed by the grant of Ellisþ application 

to an

extent contrary to public interest.

 It is not the function of this Court to weigh the evidence. Our review 

indicates

that the PSCþs conclusions are based upon adequate findings of fact, supported by

substantial evidence in the record. We conclude that the PSC gave reasonable

consideration to Three Riversþ service. We hold that the PSCþs findings are not 

clearly

erroneous and the District Court correctly affirmed its decision.

 ISSUE FIVE 

 Did the PSC err by failing to follow its own precedent, and if so, did it err by

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failing to provide a reasoned explanation for its departure from that precedent?

 Three Rivers argues that the PSCþs decision in this case is diametrically 

opposed

to its decision in Ellis I. Citing Atchison Topeka and Santa Fe Railroad Co. v. 

Board

of Trade (1973), 412 U.S. 800, 93 S.Ct. 2367, 37 L.Ed.2d 350, it argues that the PSC

therefore had a duty to explain its departure from the prior decision. Having 

failed to

do so, it asserts that the PSCþs decision must be reversed. 

 It is a well-established principle of agency law that an agency has a duty to 

either

follow its own precedent or provide a reasoned analysis explaining its departure. 

Atchison Topeka and Santa Fe Railroad Co., 412 U.S. at 808. But in this case, the 

PSC

did not depart from its prior policies and standards. Indeed, its decision in this 

case is

entirely consistent with its decision in Ellis I.

 The factual landscape when Ellis I was decided in 1984 differed significantly 

from

that a decade later when it rendered the decision in this case. Ten years ago, 

there were

few concerns about the adequacy of Three Riversþ service or the reasonableness of its

rates. There were only a few isolated instances of missed garbage pickups. The 

majority

of the witnesses at the hearing testified that the service was satisfactory. While 

a few

people complained about Three Riversþ rates, the complaints did not lead the PSC to

conclude that an additional garbage hauler was necessary. In short, there was 

insufficient

evidence that Three Rivers had provided inadequate service or that public convenience

and necessity required additional service. Moreover, the route involved in Ellis I

involved primarily Gallatin County, while the route in this case involves both 

Gallatin and

Madison Counties, with some territorial exclusions.

 With regard to the element of competition, the PSC correctly noted in 1984 that

 69-12-323(2)(b), MCA, gave it discretion to consider competition, and it stated 

that in

some cases the advent of competition would be beneficial to the public interest. 

Indeed,

it expressly stated that the þCommission can conceive of instances where competition

would exert a positive influence in the maintenance of good quality service and 

reasonable

rates.þ The PSC also correctly noted, however, that competition in the abstract is

insufficient standing alone to justify granting an application. Rather, there must 

be

sufficient evidence in the record based upon the specific facts at hand to establish 

public

convenience and necessity.

 Based upon the facts in 1984, the PSC found that competition at that time would

be destructive. Recent history had demonstrated that the area needed stability, 

because

competition had produced a negative impact upon both the industry and the consumer. 

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Three Rivers had been the first company in the decade prior to 1984 that was a 

healthy

carrier, adequately serving the area. In that same decision, the PSC warned Three 

Rivers

that þ[t]his is not to say that the public should be prepared to tolerate unmet 

demand or

inadequate service or unreasonable rates should they occur in the future. [Three 

Rivers]

remains on notice that the Commission retains the power to reexamine the situation 

and

grant a new authority should the circumstances merit it.þ 

 Ten years later, the PSC determined that the circumstances merited it. None of

the PSCþs standards or application of the law changed, only the facts did. We 

therefore

hold that the PSC did not depart from established precedent. The District Court 

correctly

affirmed the PSCþs order.

 We affirm the order of the District Court.

 /S/ WILLIAM E. HUNT, SR.

We Concur:

/S/ KARLA M. GRAY

/S/ JAMES C. NELSON

/S/ JIM REGNIER 

/S/ TERRY N. TRIEWEILER

 

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